The bad loan ratio of South Korean banks rose in the first quarter as local lenders were less aggressive in clearing up bad loans, the financial watchdog said Thursday.
The non-performing loan ratio for 18 local lenders reached 0.78 percent as of the end of March, up from 0.72 percent at the end of last year, according to the Financial Supervisory Service (FSS).
Bad loans or loans classified substandard and below are debts that are overdue for over three months. The non-performing loan ratio refers to the ratio of bad loans to aggregate lending.
The bad loan ratio in 2007 reached the lowest level since 1999, when banks' loans began to be classified based on soundness, the FSS said. Since the 1997-98 Asian financial crisis, when the average bad debt ratio stood at 12.9 percent, the watchdog has forced banks to improve their risk management.
"The bad debt ratio rose as of the end of March mainly because lenders were relatively less aggressive in clearing up bad loans in the first and third quarters," the FSS said in a statement. Banks usually make efforts to clear out more non-performing loans in the second and fourth quarters in a bid to shore up their
balance sheet.
Bad loans reached 8.9 trillion won ($8.7 billion) as of the end of March, compared with 7.7 trillion won three months earlier, while total lending came to 1,132.3 trillion won, up from 1,074.2 trillion won at the end of 2007, the FSS said.